HollyFrontier Corporation

Welcome to the Holly Frontier Corporation's first quarter 2020 conference call and webcast. Hosting the call today from Holly Frontier is Mike Jennings, President and Chief Executive Officer. He is joined by Rich Valava. Executive Vice President and Chief Financial Officer, and Tom Creary, President, Refining and Marketing. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press Star 1 on your touch-tone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. If you should require operator assistance, please press star zero. We ask that you please limit your questions to one question and one follow-up. Additionally, we ask that you pick up your handset to allow optional sound quality. Please note that this conference is being recorded. It is now my pleasure to turn the floor over to Craig Perry, Director, Investor Relations. Craig, you may begin.

Thank you, Polly. Good morning, everyone, and welcome to Holly Frontier Corporation's first quarter 2020 earnings call. This morning, we issued a press release announcing results for the quarter ending March 31, 2020. If you would like a copy of the press release, you may find one on our website at hollyfrontier.com. Before we proceed with remarks, please note the safe harbor disclosure statement in today's press release. In summary, it says statements made regarding management expectations, judgments, or predictions are forward-looking statements. These statements are intended to be covered under the safe harbor provisions of federal security laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call also may include discussion of non-GAAP measures, Please see the press release for Reconciliations to Gap Financial Measures. Also, please note any time-sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript. And with that, I'll turn the call over to Mike Jennings. Thanks, Craig.

Good morning, everyone. Before the team and I share our usual discussion of business updates and our quarterly results, let me first begin saying that I hope you and your families are staying healthy. and safe during this unprecedented time. The COVID-19 pandemic has struck a hard blow on the economy, our company, and our families. With this situation, given the potential to create distraction, I want to express my gratitude to our employees who have stepped up and delivered in a very safe and consistent and professional way during this period. The impact of COVID-19 on the global macro economy has created unprecedented destruction of demand as well as lack of forward visibility for many of the transportation fuels, lubricants, and specialty products, and the associated transportation and terminal services that we provide. While we expect a strong recovery of demand for all these essential products in the long run, there is little visibility on the timing for or the extent of this recovery in the near term. In response to the COVID-19 pandemic, and with the health and safety of our employees as our top priority, we took several actions, including limiting onsite staff at all of our facilities to essential operational personnel only, implementing a work-from-home policy for certain employees, and restricting travel unless approved by senior leadership. We will continue to monitor COVID-19 developments and the dynamic environment to properly address these policies going forward. I'll now get into the details of our first quarter results. Today we reported first quarter net loss attributable to Holly Frontier shareholders of 305 million, or a negative $1.88 per diluted share. First quarter results reflect special items that collectively decreased net income by 391 million. Excluding these items, net income for the first quarter was $87 million, or 53 cents per diluted share. versus adjusted net income of $93 million or 54 cents a share for the same period in 2019. Adjusted EBITDA for the period was $269 million, a decrease of $13 million compared to the first quarter of 2019. This decrease in earnings was driven by lower product margins and crude differentials. The refining segment had adjusted EBITDA of $176 million compared to $193 million for the first quarter of 2019. Consolidated refinery gross margin was $11.32 per produced barrel, an 11% decrease compared to the same period last year. Our lubricants and specialty products business recorded EBITDA of $32 million compared to $11 million in the first quarter of 2019. RAC Forward EBITDA was $77 million, representing a 16% EBITDA margin and our strongest quarter to date since the acquisitions of PCLI, Sonneborn, and Red Giant Oil. During our strong first quarter, we have, despite our strong first quarter, we have withdrawn 2020 guidance for the RAC Forward business. Within our industrial and passenger car related end markets, beginning late in the first quarter, demand drops substantially. While in our personal care end markets, demand is running slightly below normal. We expect industrial end market demand to rebound with the broader economy, and within the RAC back portion, we expect base oil demand to rebound with the reopening of its primary transportation-related end markets. Similar to our refining segment, we intend to match production to market demand. Poly Energy Partners reported EBITDA of $64 million for the first quarter compared to $94 million in the first quarter of last year. The first quarter included nonrecurring loss on early extinguishment of debt of $26 million related to HEP's previously outstanding 6% notes due 2024. In view of both the short-term impact from COVID-19 as well as our expectations for the future, HEP reduced its quarterly distribution to 35 cents per unit, representing a new policy focused on funding all capital expenditures and distributions within cash flow, improving distributable cash flow coverage to 1.3 times or greater, and reducing leverage to 3.0 to 3.5 times EBITDA. As we continue to navigate the COVID-19 pandemic, our top priority remains the health and safety of our employees, communities, and contractors. We are committed to delivering safe and reliable operations during this challenging environment. We believe our disciplined approach to capital allocation, led by our strong balance sheet and liquidity position, will help to position Holley Frontier for long-term success. And now I'll turn the call over to Tom for an update on our commercial operations. Thanks, Mike.